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0000950123-10-098501.txt : 201011010000950123-10-098501.hdr.sgml : 2010110120101101064310ACCESSION NUMBER:0000950123-10-098501CONFORMED SUBMISSION TYPE:SC 14D9PUBLIC DOCUMENT COUNT:11FILED AS OF DATE:20101101DATE AS OF CHANGE:20101101

SUBJECT COMPANY:

COMPANY DATA:COMPANY CONFORMED NAME:Cardiac Science CORPCENTRAL INDEX KEY:0001323115STANDARD INDUSTRIAL CLASSIFICATION:SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]IRS NUMBER:943300396FISCAL YEAR END:1231

FILING VALUES:FORM TYPE:SC 14D9SEC ACT:1934 ActSEC FILE NUMBER:005-80975FILM NUMBER:101153397

BUSINESS ADDRESS:STREET 1:3303 MONTE VILLA PARKWAYCITY:BOTHELLSTATE:WAZIP:98021BUSINESS PHONE:425-402-2206

MAIL ADDRESS:STREET 1:3303 MONTE VILLA PARKWAYCITY:BOTHELLSTATE:WAZIP:98021

FORMER COMPANY:FORMER CONFORMED NAME:CSQ Holding CODATE OF NAME CHANGE:20050407

FILED BY:

COMPANY DATA:COMPANY CONFORMED NAME:Cardiac Science CORPCENTRAL INDEX KEY:0001323115STANDARD INDUSTRIAL CLASSIFICATION:SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]IRS NUMBER:943300396FISCAL YEAR END:1231

FILING VALUES:FORM TYPE:SC 14D9

BUSINESS ADDRESS:STREET 1:3303 MONTE VILLA PARKWAYCITY:BOTHELLSTATE:WAZIP:98021BUSINESS PHONE:425-402-2206

MAIL ADDRESS:STREET 1:3303 MONTE VILLA PARKWAYCITY:BOTHELLSTATE:WAZIP:98021

FORMER COMPANY:FORMER CONFORMED NAME:CSQ Holding CODATE OF NAME CHANGE:20050407

SC 14D91v57196sc14d9.htmSC 14D9

sc14d9

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington,D.C. 20549

SCHEDULE14D-9
(RULE14d-101)

SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934

CARDIAC SCIENCE CORPORATION
(Name of Subject Company)

CARDIAC SCIENCE CORPORATION
(Name of Person Filing Statement)

Common Stock, Par Value $0.001 Per Share
(Title of Class of Securities)

14141A108
(CUSIP Number of Class of Securities)

Michael K. Matysik
Senior Vice President, Chief Financial Officer and Secretary
Cardiac Science Corporation
3303 Monte Villa Parkway
Bothell, Washington 98021
(425)402-2000

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)

With a copy to:

Stewart M. Landefeld,Esq.
Eric A. DeJong,Esq.
Perkins Coie LLP
1201 Third Avenue, Suite4800
Seattle, Washington 98101
(206)359-8000

o Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

TABLE OF CONTENTS

Item

Page

Item 1.

Subject Company Information

1

Item 2.

Identity and Background of the Filing Persons

1

Item 3.

Past Contacts, Transactions, Negotiations and Agreements

2

Item 4.

The Solicitation or Recommendation

9

Item 5.

Person/Assets, Retained, Employed, Compensated or Used

37

Item 6.

Interest in Securities of the Subject Company

37

Item 7.

Purposes of the Transaction and Plans or Proposals

37

Item 8.

Additional Information

37

Item 9.

Exhibits

40

Annexes

Annex A:

Information Statement pursuant to Section14(f) of the Securities Exchange Act of 1934 and Rule14f-1 thereunder

A-1

Annex B:

Opinion of Piper Jaffray& Co.

B-1

EX-99.A.7EX-99.E.3EX-99.E.4EX-99.E.5

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ITEM1.

SUBJECT COMPANY INFORMATION

(a)

Name and Address

The name of the subject company is Cardiac Science Corporation, a Delaware corporation (Cardiac Science). The address of Cardiac Sciences principal executive office is 3303 Monte Villa Parkway, Bothell, Washington 98021, and its telephone number is (425)402-2000.

(b)

Securities

This Schedule14D-9 relates to the outstanding shares of common stock, par value $0.001 per share, of Cardiac Science (collectively, the Shares). As of October29, 2010, there were 23,867,815Shares issued and outstanding.

ITEM2.

IDENTITY AND BACKGROUND OF THE FILING PERSONS

(a)

Name and Address

The business address and telephone number of Cardiac Science, which is both the person filing this Schedule14D-9 and the subject company, are set forth in Item1(a) above under the heading Name and Address and incorporated herein by reference.

(b)

Tender Offer

This Schedule14D-9 relates to the tender offer by Jolt Acquisition Company (Merger Sub), a Delawarecorporation and wholly owned subsidiary of Opto Circuits (India) Ltd., a public limited company incorporated under the law of the nation of India (Opto Circuits), to purchase all of the outstanding Shares at a purchase price of $2.30 per share, net to the seller in cash, without interest thereon (the Offer Price) less any required withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November1, 2010 (the Offer to Purchase), and in the related Letter of Transmittal (that, together with the Offer to Purchase, as each of the same may be amended or supplemented from time to time, constitutes the Offer). The Offer is described in a Tender Offer Statement on ScheduleTO (as amended or supplemented from time to time, the ScheduleTO), filed by Opto Circuits and Merger Sub with the Securities and Exchange Commission (the SEC) on November1, 2010. Copies of the Offer to Purchase and Letter of Transmittal are filed as Exhibits (a)(1) and (a)(2), respectively, to this Schedule14D-9.

The Offer is being made in connection with an Agreement and Plan of Merger, dated as of October19, 2010, as amended on October29, 2010, by and among Opto Circuits, Merger Sub and Cardiac Science (as the same may be amended from time to time, the Merger Agreement). The Merger Agreement provides that following completion of the Offer, subject to the satisfaction or waiver of certain conditions, and in accordance with the Delaware General Corporation Law (the DGCL), Merger Sub will be merged with and into Cardiac Science (the Merger). Following the consummation of the Merger, Cardiac Science will continue as the surviving corporation (the Surviving Corporation) and a wholly owned subsidiary of Opto Circuits. In the Merger, each Share outstanding immediately prior to the effective time of the Merger (other than any Shares owned by Opto Circuits or Merger Sub, any shares owned by Cardiac Science as treasury stock and any shares owned by stockholders who properly exercised appraisal rights under Delaware law with respect to their Shares) will be cancelled and converted into the right to receive an amount in cash, without interest thereon, equal to the Offer Price less any required withholding taxes. The Merger Agreement is more fully described in Section11 of the Offer to Purchase. Copies of the Merger Agreement and amendment are filed as Exhibits (e)(1)and (e)(2) to this Schedule14D-9 and are incorporated by reference herein.

Pursuant to the terms of the Merger Agreement, Cardiac Science has granted to Opto Circuits and Merger Sub an option (the Top-Up Option), exercisable only upon the terms and conditions set forth in the Merger Agreement, to purchase from Cardiac Science the number of newly-issued Shares of common stock equal to the lowest number of Shares of common stock that, when added to the number of Shares owned by Opto Circuits and Merger Sub at the time of exercise of the Top-Up Option, constitutes one Share more than ninety percent of the number of Shares of common stock issued and outstanding immediately after the issuance of all Shares subject to the Top-Up Option. However, the Top-Up Option may not be exercised to the extent that the number of newly-issued Shares exceeds

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that number of shares of common stock authorized and unissued and not reserved for issuance at the time of exercise of the Top-Up Option with respect to any restricted stock units then outstanding or any options to purchase Cardiac Science common stock that has an exercise price per share less than the Offer Price. The Top-Up Option is discussed in more detail under the heading Top-Up Option in Item8(b) below.

Merger Sub is a Delaware corporation and, to date, has engaged in no activities other than those incident to its formation and to the Offer and the Merger. Purchaser is a wholly-owned subsidiary of Opto Circuits. As set forth in the ScheduleTO, Opto Circuits principal executive office is Plot No.83, Electronics City, Hosur Road, Bangalore India, 560 100.

ITEM3.

PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS

Except as set forth in this Item3, or in the Information Statement of Cardiac Science attached to this Schedule14D-9 as AnnexA (the Information Statement) or as incorporated by reference herein, as of the date hereof, to the knowledge of Cardiac Science there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between Cardiac Science or its affiliates and: (i)its executive officers, directors or affiliates; or (ii)Opto Circuits, Merger Sub or their respective executive officers, directors or affiliates. The Information Statement is being furnished to Cardiac Sciences stockholders pursuant to Section14(f) of the Exchange Act and Rule14f-1 thereunder in connection with Opto Circuits right, after accepting the tendered Shares for payment and pursuant to the Merger Agreement, to designate persons to the board of directors of Cardiac Science (the Cardiac Science Board) other than at a meeting of the stockholders of Cardiac Science. The Information Statement is incorporated herein by reference.

(a)

Arrangements with Current Executive Officers, Directors, and Affiliates of Cardiac Science

In considering the recommendation of the Cardiac Science Board as set forth in Item4 below, stockholders should be aware that certain executive officers and directors of Cardiac Science have interests in the Offer and the Merger, which are described below, that may be different from or in addition to the interests of the stockholders generally. The Cardiac Science Board is aware of these potential conflicts and considered them along with the other factors described in this Item3 and Item4 below in approving the Merger Agreement and making such recommendation.

Cash Consideration Payable Pursuant to the Offer

If each of Cardiac Sciences directors and executive officers were to tender the Shares each owns for purchase pursuant to the Offer, each would receive the same cash consideration on the same terms and conditions as the other stockholders. As discussed below under Item4. The Solicitation or Recommendation, to the knowledge of Cardiac Science all of Cardiac Sciences directors and executive officers currently intend to tender all of their Shares for purchase pursuant to the Offer. Subject to the satisfaction or waiver of certain conditions, any outstanding Shares not tendered in the Offer will be cancelled and converted into the right to receive the Offer Price, without interest, in the Merger.

As of October29, 2010, Cardiac Sciences directors and executive officers owned, directly and indirectly, in the aggregate 198,176Shares (excluding Shares issuable upon the exercise of stock options and vesting of restricted stock units). If the directors and executive officers were to tender all of their Shares for purchase pursuant to the Offer, and those Shares were purchased by the Merger Sub at the Offer Price, the directors and executive officers would receive an aggregate of $455,805 in cash, without interest and less any required withholding taxes.

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Table of Contents

The approximate value of cash payments that each director and executive officer of Cardiac Science would receive in exchange for his or her Shares in the Offer is set forth in the table below. This information is based on the number of Shares held by Cardiac Sciences directors and executive officers as of October29, 2010.

Consideration

Payable in

Name of Director or Executive Officer

Shares

Respect of Shares

Timothy C. Mickelson

8,000

$

18,400

Ruediger Naumann-Etienne

98,748

227,120

Ronald A. Andrews, Jr.

W. Robert Berg

8,403

19,327

David L. Marver

13,675

31,452

Michael Matysik

37,260

85,698

Robert Odell

3,675

8,453

Ralph Titus

8,196

18,851

Kurt Lemvigh

9,015

20,734

Barbara Thompson

6,657

15,311

Todd Alberstone

Noreen Browne

2,100

4,830

Alfred Ford

2,447

5,628

Treatment of Cardiac Science Stock Options and Restricted Stock Units

Stock Options.Each option to purchase common stock (excluding any purchase rights outstanding under Cardiac Sciences 2002 Employee Stock Purchase Plan) that is outstanding immediately prior to the effective time of the Merger (an Option) and that has an exercise price per share less than the Offer Price (an In the Money Option) will be fully accelerated in vesting and will, without any further action on the part of the holder of such an In the Money Option, be cancelled at the effective time of the Merger and the holder of such Option will, in substitution for and full settlement of such Option, be entitled to receive from Opto Circuits an amount, subject to any required withholding of taxes, in cash equal to the product of the Offer Price less the exercise price per share of the common stock of such Option multiplied by the number of Shares of common stock subject to such Option (the Option Consideration). Before the effective time of the Merger, Cardiac Science shall take all actions (including causing the Cardiac Science Board to take all actions) that are necessary to provide for (i)the acceleration of vesting of the In the Money Options contingent on the consummation of the Merger such that all In the Money Options will be fully vested immediately prior to the effective time of the Merger and (ii)the termination at the effective time of the Merger of all In the Money Options in exchange for the applicable Option Consideration. Each Option that is not an In the Money Option will not be assumed or substituted for and will terminate at the effective time of the Merger without any further action by the holder thereof. None of Cardiac Sciences directors or executive officers hold any In the Money Options.

Restricted Stock Units.Each restricted stock unit that is outstanding immediately prior to the effective time of the Merger (a RSU) will be fully accelerated in vesting and will be cancelled at the effective time of the Merger and the holder of such RSU will be entitled to receive from Opto Circuits, in full settlement of such RSU, an amount, in cash equal to the product of the Offer Price multiplied by the maximum number of Shares of common stock subject to such RSU, subject to any required withholding of taxes.

The approximate value of cash payments that each director and executive officer of Cardiac Science will receive in exchange for cancellation of his or her RSUs is set forth in the table below. This information is based on

3

Table of Contents

the number of RSUs held by Cardiac Sciences directors and executive officers as of October29, 2010, assuming the Merger is completed on December1, 2010.

Cash

Number

Consideration

Name of Director or Executive Officer

of RSUs

for RSUs

Timothy C. Mickelson

9,000

$

20,700

Ruediger Naumann-Etienne

9,000

20,700

Ronald A. Andrews, Jr.

8,000

18,400

W. Robert Berg

9,000

20,700

David L. Marver

290,000

667,000

Michael Matysik

150,537

349,235

Robert Odell

105,000

241,500

Ralph Titus

41,929

96,437

Kurt Lemvigh

26,929

61,937

Barbara Thompson

64,429

148,187

Todd Alberstone

50,000

115,000

Noreen Browne

32,500

74,750

Alfred Ford

35,822

82,391

In connection with the termination of the Cardiac Science Corporation 2002 Stock Incentive Plan, the QuintonCardiology Systems, Inc. Amended and Restated Equity Incentive Plan and the Cardiac Science, Inc. 1997 Stock Option/Stock Issuance Plan, following the Merger, no person who held Options or RSUs prior to the Merger, or any participant or beneficiary of the equity plans, will have any right to acquire or receive any equity securities of the Surviving Corporation or any consideration other than those discussed above.

Employee Stock Purchase Plan

Under the Merger Agreement, the current offering period under the Cardiac Science Corporation Employee Stock Purchase Plan (the ESPP) will continue until November30, 2010. After that time, no further offerings will be made under the ESPP and the ESPP will be terminated effective as of the completion of the Merger, unless the Merger Agreement is earlier terminated.

The following table sets forth the approximate number of Shares expected to be purchased by CardiacSciences executive officers under the ESPP at the end of the current offering period on November30, 2010, assuming: (i)the executive officers do not withdraw from the offering prior to the end of the current offering period, and (ii)a purchase price per Share of $1.94 (which is equal to 85% of the fair market value of a Share on October29, 2010):

Number of

Shares to be

Name of Executive Officer

Purchased

David L. Marver

525

Michael Matysik

Robert Odell

525

Ralph Titus

Kurt Lemvigh

525

Barbara Thompson

525

Todd Alberstone

Noreen Browne

525

Alfred Ford

4

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Employment Agreements

The employment agreements with Messrs.Marver, Matysik, Odell, Titus, Alberstone and Ford and Msses.Thompson and Browne provide for payments to such executive officers upon specified termination of employment events. Each of the agreements with the executive officers may be terminated (i)upon the death or total disability of the executive officer or (ii)by Cardiac Science or by the executive officer at any time for any reason. Under his agreement, Kurt Lemvigh is provided no notice for termination by Cardiac Science in certain limited circumstances (as those circumstances are described in Mr.Lemvighs agreement) and nine months notice (12months notice for two years following a change in control) for termination by us for any other reason, and Mr.Lemvigh provides 60days notice for termination by him for any reason. If an executive officers employment is terminated due to death, total disability or voluntary termination without good reason (as good reason is defined below), such executive officer will be entitled to receive any base salary due at that time. Under his agreement, if Mr.Lemvigh is given notice by Cardiac Science that his employment is terminated without cause, he will continue to be entitled to his base salary and contractual benefits for the duration of his notice period, provided that Cardiac Science in its discretion can terminate Mr.Lemvighs employment without notice and pay him a sum equal to the base salary he would have received during the notice period.

If a change in control (as change in control is defined below) occurs during the term of an executive officers employment with Cardiac Science and Cardiac Science terminates the executive officers employment without cause (as cause is defined below) in connection with the change in control, the successor employer terminates the executives employment without cause within 24months of the consummation of the change in control, or the executive officer terminates his/her employment for good reason (as good reason is defined below) in connection with the change in control or within 24months of the consummation of the change in control (each such event a change in control trigger event), the executive officer will be entitled to receive, in addition to any benefits to which he is entitled under our employee benefit plans and equity and incentive compensation plans, the following benefits:

1.Severance payments equal to the higher of the executive officers base salary in effect immediately prior to the change in control or his base salary in effect immediately prior to termination and to a specified percentage of his target annual bonus, to be paid out over the number of months following the termination date in the course of Cardiac Sciences or the successor employers regularly scheduled payroll as follows:

David Marver 24months salary and 200% target bonus

Michael Matysik 18months salary and 150% target bonus

Robert Odell 18months salary and 150% target bonus

Ralph Titus 12months salary and 100% target bonus

Barbara Thompson 12months salary and 100% target bonus

Todd Alberstone 12months salary and 100% target bonus

Noreen Browne 12months salary and 100% target bonus

Alfred Ford 12months salary and 100% target bonus

Under his agreement, if the Company terminates Kurt Lemvighs employment within two years after a change in control, he would receive 12months salary.

2.Continuation of health, dental and vision insurance, at substantially equivalent coverage to those in place as of the termination date, and life insurance, including supplemental coverage, if and as allowed under the policys portability clause, for no less than the period of months specified for each executive officer in 1 above, and other benefits substantially equivalent to those in place as of the termination date, for the period of months specified for each executive in 1 above;

3.Any unpaid salary as of the date the executive officers employment terminates;

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4.Any earned and unpaid bonus for the year the executive officers employment terminates, prorated through the date of termination;and

5.Acceleration of vesting of 100% of the executive officers then unvested options to purchase shares of Cardiac Sciences common stock or shares of common stock of the successor employer issued in substitution of Cardiac Sciences common stock in connection with the change in control and 100% of the executive officers then unvested restricted stock units or other similar stock based awards.

The following table describes the potential maximum payments to each of Cardiac Sciences executive officers who was employed by Cardiac Science on October29, 2010 (i)in the event of their termination without cause upon the occurrence of the Offer or Merger or (ii)within 24months following Merger Subs purchase of Shares tendered in the Offer, their involuntary termination or termination by them with good reason. These calculations are based on the assumption that the change in control and termination event occurred on December1, 2010. The following table does not include any accrued and unpaid base salary to which the executives also would be entitled and does not include payments made for outstanding Shares, In the Money Options or RSUs that will be made regardless of the executive officers termination pursuant to the Merger Agreement and are described earlier under the headings Cash Consideration Payable Pursuant to the Offer and Treatment of Cardiac Science Stock Options and Restricted Stock Units.

Potential

Maximum

Payments/

Name

Description of Payments and Executive Benefits

Benefits

David L. Marver

Pro Rata Portion of 2010 Bonus(1)

$

232,000

Payment Based on Base Salary

960,000

Payment Based on Annual Bonus Plan

960,000

Health Care Continuation(2)

13,752

Total:

$

2,165,752

Michael Matysik

Pro Rata Portion of 2010 Bonus(1)

$

149,833

Payment Based on Base Salary

465,000

Payment Based on Annual Bonus Plan

465,000

Health Care Continuation(2)

24,534

Total:

$

1,104,367

Robert Odell

Pro Rata Portion of 2010 Bonus(1)

$

147,417

Payment Based on Base Salary

457,500

Payment Based on Annual Bonus Plan

457,500

Health Care Continuation(2)

23,310

Total:

$

1,085,727

Ralph Titus

Pro Rata Portion of 2010 Bonus(1)

$

69,600

Payment Based on Base Salary

240,000

Payment Based on Annual Bonus Plan

144,000

Health Care Continuation(2)

16,356

Total:

$

469,956

Kurt Lemvigh(3)

Payment Based on Base Salary

$

373,225

Health Care Continuation(2)

20,154

Total:

$

393,379

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Potential

Maximum

Payments/

Name

Description of Payments and Executive Benefits

Benefits

Barbara Thompson

Pro Rata Portion of 2010 Bonus(1)

$

27,500

Payment Based on Base Salary

220,000

Payment Based on Annual Bonus Plan

66,000

Health Care Continuation(2)

18,660

Total:

$

332,160

Todd Alberstone

Pro Rata Portion of 2010 Bonus(1)

$

30,625

Payment Based on Base Salary

245,000

Payment Based on Annual Bonus Plan

73,500

Health Care Continuation(2)

16,356

Total:

$

365,481

Noreen Browne

Pro Rata Portion of 2010 Bonus(1)

$

41,667

Payment Based on Base Salary

250,000

Payment Based on Annual Bonus Plan

100,000

Health Care Continuation(2)

15,924

Total:

$

407,591

Alfred Ford

Pro Rata Portion of 2010 Bonus(1)

$

41,667

Payment Based on Base Salary

250,000

Payment Based on Annual Bonus Plan

100,000

Health Care Continuation (2)

10,319

Total:

$

401,986

(1) Assumes performance milestones were satisfied at target.

(2) Based on premiums rates in effect in October 2010.

(3) GBP conversion rate: $1.50150.

Under the amended and restated employment agreements, a change in control occurs upon:

1.A merger or consolidation of Cardiac Science with or into any other company, entity or person, such as the proposed Merger;

2.A sale, lease, exchange or other transfer, in one transaction or a series of transactions undertaken with a common purpose, of all or substantially all of Cardiac Sciences then outstanding securities or all or substantially all of Cardiac Sciences assets;

3.The purchase of a significant portion of Cardiac Sciences common stock without approval of a majority of Cardiac Sciences incumbent directors;or

4.A successful proxy contest, which is stated in terms of the Cardiac Science Board becoming composed of a majority of persons that are not incumbent directors (or appointed or nominated by incumbent directors).

Under the amended and restated employment agreements, good reason means the occurrence of any of the following and the failure of Cardiac Science or a successor company to cure within 30days after receipt of written notice from the officer asserting that good reason exists and specifying the circumstances constituting such good reason: a material reduction in title, status, authority or responsibility, a material reduction in salary or bonus opportunity or material adverse modifications to stock option award or plan, a material breach of the agreement by Cardiac Science or a successor company, or required relocation more than 50miles from the current place of employment.

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Under the amended and restated employment agreements, cause means the occurrence of one or more of the following events: (i)willful misconduct, insubordination or dishonesty or material violation of Cardiac Science policies and procedures which results in a material adverse effect on Cardiac Science; (ii)continued failure to satisfactorily perform duties after written notice by Cardiac Science of the areas of deficiency; (iii)willful actions in bad faith or intentional failures to act in good faith that materially impair Cardiac Sciences business, goodwill or reputation; (iv)conviction of a felony or misdemeanor or failure to contest prosecution for a felony or misdemeanor; Cardiac Sciences reasonable belief that the executive engaged in a violation of any statute, rule or regulation governing Cardiac Science that is harmful to Cardiac Sciences business or reputation; Cardiac Sciences reasonable belief that the executive engaged in unethical practices, dishonesty or disloyalty; (v)current use of illegal substances; (vi)material violation of the executives confidentiality agreement; or (vii)solely for purposes of a termination without cause other than in connection with a change in control, Cardiac Science fails as a business enterprise.

If Cardiac Science terminates the employment of Mr.Marver, Mr.Matysik, Mr.Titus, Mr.Odell, Ms.Thompson, Ms.Browne, Mr.Ford or Mr.Alberstone with cause, the successor employer terminates such executive officers employment with cause within 24months of the consummation of the change in control, or such executive officer terminates his employment without good reason in connection with the change in control or within 24months of the change in control, he/she will be entitled to receive only base salary due to him/her.

All severance payments and benefits under the employment agreements are contingent on the executive officers signing a full release and complying with the terms of a confidentiality, non solicitation, and non competition agreement entered into with Cardiac Science.

Employment Following the Merger

As of the date of this Schedule14D-9, Opto Circuits and Merger Sub have informed Cardiac Science that no members of Cardiac Sciences current management have entered into any agreement, arrangement or understanding with Opto Circuits, Merger Sub or their affiliates regarding employment with the surviving corporation. Opto Circuits has informed Cardiac Science that it currently intends to retain certain members of Cardiac Sciences management team following the consummation of the Merger. As part of these retention efforts, Opto Circuits may enter into employment or consultancy compensation, severance or other employee or consultant benefits arrangements with Cardiac Sciences executive officers and certain other key employees; however, there can be no assurance that any parties will reach an agreement. These matters are subject to negotiation and discussion and no terms or conditions have been finalized. Any new arrangements are currently expected to be entered into at or prior to the consummation of the Merger and would not become effective until the consummation of the Merger.

Indemnification and Insurance

Under the terms of the Merger Agreement, Opto Circuits has agreed to cause the surviving corporation of the Merger to indemnify and hold harmless the individuals who on or prior to the effective time of the Merger were directors or officers of Cardiac Science or any of its subsidiaries or corporate parents against any costs or expenses (including reasonable attorneys fees), judgments, fines, losses, claims, damages or liabilities in connection with actions or omissions occurring at or prior to the effective time of the Merger. Such indemnification will be provided to the fullest extent permitted by and subject to the limitations of law and Opto Circuits shall cause the surviving corporation of the Merger to promptly advance expenses as incurred to the fullest extent permitted by law. The Merger Agreement provides that the provisions relating to indemnification in the certificate of incorporation and bylaws of the surviving corporation will not be amended, repealed or otherwise modified after the effective time of the Merger in a manner that would materially adversely affect the rights thereunder of the indemnified parties, unless such modification is required by law.

Under the terms of the Merger Agreement, the surviving corporation will also, for a period of six years after the effective time of the Merger, maintain the directors and officers liability insurance policies and fiduciary liability insurance currently maintained by Cardiac Science and its subsidiaries for the directors or officers of Cardiac Science or any of its subsidiaries and any other employees, agents or other individuals otherwise covered by such insurance policies prior to the effective time of the Merger. In lieu of the purchase of such insurance by Opto

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Circuits or the surviving corporation, Cardiac Science may at its option prior to the effective time of the Merger purchase a six year extended reporting period or tail policy for directors and officers liability insurance and fiduciary liability insurance providing at least the same coverage with respect to matters occurring at or prior to the effective time of the Merger.

(b)

Arrangements with Opto Circuits and Merger Sub

Merger Agreement

The summary of the Merger Agreement contained in Section11 of the Offer to Purchase and the description of the conditions of the Offer contained in Section13 of the Offer to Purchase are incorporated herein by reference. This summary is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit (e)(1) to this Schedule14D-9 and is incorporated herein by reference.

Non-Disclosure Agreement

Cardiac Science, Opto Circuits and Criticare Systems, Inc., a wholly-owned subsidiary of Opto Circuits, entered into a mutual non-disclosure agreement dated June25, 2010 (the June 25 Letter) as amended by the Addendum No.1 to the Mutual Nondisclosure Agreement, dated July26, 2010 (the July 26 Letter, together with the June 25 Letter, the Nondisclosure Agreement) in connection with Opto Circuits consideration of a possible negotiated transaction involving Cardiac Science (the Authorized Purpose). As a condition to being furnished confidential information (as defined in the Nondisclosure Agreement), Criticare Systems, Inc. and Cardiac Science agreed that they will, among other things, keep the confidential information confidential in accordance with the terms of the Nondisclosure Agreement and, subject to certain exceptions, use the confidential information solely for the Authorized Purpose and undertake reasonable precautions to safeguard and protect the confidentiality of the confidential information and to prevent its employees or agents from prohibited or unauthorized disclosure or uses of the confidential information.

The Nondisclosure Agreement covers the disclosure of confidential information for a period of three years from the date of the June 25 Letter.

The foregoing summary of the Nondisclosure Agreement does not purport to be complete and is qualified in its entirety by reference to the Nondisclosure Agreement. The June 25 Letter is filed as Exhibit (e)(3) and the July 26 Letter is filed as Exhibit (e)(4) hereto and each is incorporated herein by reference.

Letter of Intent

As part of the discussions between Opto Circuits and Cardiac Science regarding a potential transaction, Opto Circuits considered purchasing solely Cardiac Sciences monitoring business. To that end, on August12, 2010, Opto Circuits and Cardiac Science entered into a letter of intent, dated August10, 2010, which was intended to be non-binding except for certain limited provisions. Pursuant to the letter of intent, Opto Circuits proposed to acquire Cardiac Sciences monitoring business through an asset purchase transaction for a cash purchase price of $33 to $35million. The letter of intent outlined a proposed transaction based on each partys then-present understanding of the current condition of the assets and business operation of Cardiac Science. The letter of intent also included a description of other terms and conditions of a potential transaction. The foregoing summary of the LOI does not purport to be complete and is qualified in its entirety by reference to the LOI. The LOI is filed as Exhibit (e)(5) hereto and is incorporated herein by reference.

ITEM4.

THE SOLICITATION OR RECOMMENDATION

(a)

Recommendation of the Cardiac Science Board

After careful consideration by the Cardiac Science Board, including a thorough review of the Offer with Cardiac Sciences outside legal and financial advisors and Cardiac Sciences senior management and of other alternatives available to Cardiac Science, the Cardiac Science Board, unanimously: (1)determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable, fair to and in the best interests of Cardiac Science and its stockholders; (2)approved and declared advisable the Merger

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Agreement and the transactions contemplated thereby, including the Offer and the Merger; and (3)recommended that the stockholders accept the Offer, tender their Shares to Merger Sub pursuant to the Offer and, if required by applicable law, adopt the Merger Agreement and authorize the Merger. Accordingly, the Cardiac Science Board recommends that stockholders accept the Offer and tender their Shares pursuant to the Offer.

(b)

Background and Reasons for the Recommendation of the Cardiac Science Board

Background of the Offer

Since early 2009, Cardiac Science has faced increasing challenges. By the fourth quarter of 2008, there was evidence that the economic recession would likely adversely impact demand for our products in 2009. In anticipation of declining revenues due to deteriorating economic conditions, we made the determination to restructure and downsize our workforce in early 2009. Also, in the first half of 2009, the exclusive distributor of our automatic external defibrillator products, or AEDs, in Japan, a market that represented 19% of our revenues in 2008 and accounted for a significant portion of the growth in our AED revenues from 2005 to 2008, advised us that it would begin selling its own lower cost competing AEDs in Japan. In anticipation of entering into a new distribution arrangement with another distributor for the Japan market, we terminated our agreement with our existing Japanese distributor in June 2009. AED sales in Japan declined from $39million in 2008 to $10million in 2009 and will be approximately zero in 2010. The loss of the contribution margin associated with the Japanese AED sales also had a substantial negative impact on our operating results. In addition to the negative impact that the loss of our Japanese AED distribution partner had on our operating performance, throughout 2009 sales of both AED and cardiac monitoring products declined due to adverse economic conditions and, in the case of AED products, the adverse impact of the product quality issues described below.

In June 2009, we identified a potential quality issue affecting a component used in certain of our AED products that caused us to initiate an approximately seven-week hold on shipments of new products during the summer of 2009. In November 2009, we announced that in order to address the product quality issue that led to that ship hold, we were undertaking a field corrective action affecting approximately 300,000 AEDs that we had previously sold. The corrective action plan contemplated the distribution to affected customers of a software update that was designed to enhance the ability of the AEDs self-test function to detect the existence of the product quality issue, and the repair or replacement of any malfunctioning units identified through the enhanced self-test function. We took a charge of $18.5million in the third quarter of 2009 representing our estimate of the cost to carry out this corrective action. Shortly after we announced this corrective action, the U.S.Food& Drug Administration (FDA) issued a safety alert questioning the adequacy of our communications relating to the corrective action and the adequacy of our proposed software update. The quality issue that led to this corrective action and similar quality issues experience by other AED competitors caused our management and board of directors to carefully consider the longer term risks we faced being involved in the AED business, including risks relating to our quality systems and the increased level of regulatory scrutiny focused on the entire industry. During 2010, our cash position began to erode as a result of the cash expenditures associated with this corrective action, as well as the other AED-related corrective actions described below, and as a result of increasing operating losses during the course of the year.

During November 2009, our senior management engaged in a number of informal discussions with members of our board of directors about the possibility of selling our AED business due to the risks we faced in that business. During this time, our senior management sought informal input from representatives of Piper Jaffray& Co. (Piper Jaffray) regarding a possible sale of the AED business, including the potential impact of pending quality and regulatory issues on the ability to successfully divest the AED business and preliminary ideas on potential buyers for that business. During this time, and until it was formally engaged as Cardiac Sciences financial advisor in April2010, Piper Jaffray provided informal input and advice to our senior management and board of directors regarding a potential transaction involving the AED business and other strategic alternatives, in anticipation of the possibility of being formally engaged in the event our board of directors elected to more seriously explore a potential sale of the AED business or other strategic alternatives.

In early December 2009, Christopher Davis, who at the time was a member of our board of directors, received an unsolicited letter from another company, referred to in this discussion as Company A, regarding a potential business combination between Cardiac Science and Company A. Cardiac Science and Company A had previously

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engaged in preliminary discussions about a potential business combination during 2008, but those discussions were terminated by Company A. In May 2009, Company A had again contacted us to express interest in a possible acquisition of Cardiac Science in a stock-for-stock merger with no premium to Cardiac Sciences then-current stock price. This expression of interest did not progress beyond the preliminary stage. Company As December 2009 letter to Mr.Davis discussed the potential form of consideration that Company A might be willing to pay in such a transaction, but did not mention any price. Shortly after Company As letter was received in December 2009, DaveMarver, our chief executive officer, suggested to an executive of Company A that Company A work directly with Piper Jaffray to discuss the possible terms of such a transaction. Subsequently, Piper Jaffray and Company A had a limited exchange of information.

At a meeting of our board of directors on December17, 2009, the board of directors discussed the possibility of engaging in a process to sell the AED business. Representatives of Piper Jaffray attended the meeting and presented their views regarding how the AED business might be valued and related consideration, as well as how a process to sell the AED business might be structured. At this meeting, our board of directors determined that it was not an appropriate time to sell our AED business due to the adverse effects of the existing and unresolved product quality and regulatory issues and uncertainties with regard to the value that we might expect to receive in a sale of the AED business.

At a January21, 2010 telephonic meeting of our board of directors, the board of directors and senior management discussed certain strategic alternatives, including the merits and risks of remaining independent and continuing to execute our existing business plan, remaining independent but scaling back and restructuring to reduce our costs, divesting the AED business, and selling the entire company. Although the board of directors did not make any decision at this meeting as to which of these alternatives should be pursued, the board of directors determined that it would seek additional advice from our outside counsel, Perkins Coie LLP, and Piper Jaffray, with regard to potential strategic alternatives and related considerations. The board of directors asked senior management to schedule another meeting of the board of directors in the near future for that purpose.

Our board of directors held another meeting by telephone on January29, 2010 to continue its discussion of strategic alternatives and to consider various related issues. Representatives of Perkins Coie LLP reviewed with directors certain legal considerations relating to the exploration of strategic alternatives, including directors fiduciary duties generally, duties of directors when considering a sale of control or other significant transactions, standards of judicial review and confidentiality and disclosure considerations. In addition, representatives of Piper Jaffray summarized the firms qualifications to act as financial advisor to Cardiac Science and presented their preliminary views with regard to possible valuation ranges relating to a sale of the entire company or certain parts, a potential process to solicit third party interest in such a transaction and related matters. Representatives of Piper Jaffray and senior management also summarized preliminary discussions that had been held with certain parties that had either previously expressed interest in a potential transaction with Cardiac Science or that had been contacted recently by Piper Jaffray or senior management. The board of directors determined that it was interested in having senior management, with assistance from Piper Jaffray, contact or continue preliminary discussions with selected companies to ascertain potential interest in a transaction with Cardiac Science. At this meeting, the board also formally established a Strategic Committee comprised of directors Ruediger Naumann-Etienne, Timothy Mickelson, Robert Berg and Christopher Davis to meet more frequently and provide oversight to management in connection with the exploration of strategic alternatives.

In early 2010, we identified a new AED-related product quality issue and on February3, 2010, we announced a recall of approximately 12,200 AEDs to address this issue. We recognized a $2.5million charge in the fourth quarter of 2009 representing our estimate of the costs to effect this recall. Also in February 2010, we received a warning letter from the FDA. The FDAs warning letter asserted, among other things, that we were not in compliance with various Current Good Manufacturing Practice requirements under applicable FDA regulations and that the software update that we planned to release to customers in connection with the AED field corrective action we announced in November 2009 was inadequate since it was intended to improve the products ability to detect the potential component problem but was not designed to prevent component failure. On February17, 2010, our board of directors met by telephone to discuss the warning letter and its implications, including the possibility that it could become necessary to undertake additional costly corrective actions, including a full hardware recall, to address the FDAs concerns. The board of directors directed senior management to work with our outside legal counsel to begin

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planning for certain potential adverse contingencies that could result if it became necessary to undertake additional costly corrective actions.

Shortly after the February17, 2010 board meeting, Mr.Marver and other representatives of Cardiac Science met with the FDA to review the warning letter. On February22, 2010, our board of directors met telephonically to receive an update from management on the meeting with the FDA and related developments. At this meeting, senior management advised the board of directors that our lender had expressed concerns about renewing our existing $10million line of credit, which was expiring at the end of March 2010, in light of the uncertainties surrounding the AED corrective action announced in November 2009 and related regulatory issues. At this meeting, the board of directors also directed management to begin negotiating a formal engagement of Piper Jaffray as Cardiac Sciences financial advisor and senior management provided an update on recent discussions with prospective buyers of Cardiac Science or our AED business.

At a March4, 2010 meeting of our board of directors, senior management provided the board of directors a financial forecast that indicated that under certain scenarios, we could run out of cash later in the year. Management also presented a possible cost reduction plan and discussed the potential need for additional financing to fund our operations until positive operating cash flow could be restored. The board of directors also discussed the retention of Piper Jaffray as Cardiac Sciences financial advisor and approved retaining Piper Jaffray. Additionally, management briefed the board of directors on recent discussions with another company, referred to in this discussion as Company B, in which Company B expressed interest in evaluating a potential transaction with Cardiac Science, either involving an acquisition of the entire company and divestiture of the AED business or an acquisition of only our monitoring business. Over the course of the next several weeks, our senior management negotiated the terms of Piper Jaffrays engagement letter, which was entered into on April27, 2010.

On March19, 2010, Company B submitted a proposed letter of intent relating to a potential acquisition of our monitoring business. The proposal contemplated a purchase price of $55million in cash for the monitoring business, with substantially all liabilities to be retained by Cardiac Science. In a telephone conference with the Strategic Committee and senior management that day, the board of directors determined that it would be appropriate to continue to pursue other potential buyers while continuing to negotiate with Company B. Following this meeting, our senior management continued discussions with Company B regarding a potential sale of the monitoring business, including negotiations relating to the terms of a letter of intent.

On March24, 2010, Mr.Marver, Michael Matysik, our chief financial officer, and other representatives of Cardiac Science met with another company, referred to in this discussion as Company C, which had been contacted earlier to ascertain whether Company C would possibly be interested in our AED business. At this meeting, representatives of Cardiac Science provided Company C an overview of our AED business. After this meeting, Company C conducted some preliminary due diligence. Company C later informally expressed an interest in Cardiac Sciences AED business at a value of $20million, without any indication of material conditions or terms, except that the expression of interest was subject to additional due diligence. This indication of interest was later discussed by our board of directors, which determined that the offer was too low and lacking in sufficient substance to consider further. This position was communicated to Company C by representatives of Piper Jaffray and no further discussions with Company C occurred thereafter.

On March26, 2010, our board of directors met telephonically. Mr.Matysik provided a financial update, including continued erosion of Cardiac Sciences cash position. Mr.Marver also reported on the status of discussions with Company B and Company C and Piper Jaffrays efforts to engage with other prospective buyers.

On March31, 2010, we received an updated draft of a letter of intent from Company B relating to the potential acquisition of our monitoring business. The revised draft of the letter of intent contemplated a purchase price of $53million in cash, plus additional earnout payments tied to revenues from monitoring products in the 12-month period after the closing, with accounts receivable and substantially all liabilities relating to the monitoring business to be retained by Cardiac Science.

On April7, 2010, the Strategic Committee met telephonically. Management provided the committee an update on recent contacts or discussions with a number of parties and discussed the latest proposal from Company B. The committee determined that, at the current time, the potential transaction with Company B appeared to hold the most

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potential and instructed management to seek changes to the proposal to improve the purchase price and certainty of closing. That same day, senior management contacted representatives of Company B and proposed a purchase price of $59.2million in cash and no earnout consideration, with accounts receivable and substantially all liabilities related to the monitoring business to be retained by Cardiac Science.

On April9, 2010, a representative of Company A met with Messrs.Marver and Matysik at our offices in Bothell, Washington. Following that meeting, we entered into a nondisclosure agreement with Company A and provided confidential financial and business information to Company A.

On April19, 2010, Company A submitted a preliminary proposal that contemplated a purchase of our monitoring business at a price in the range of $32million to $42million. In light of the superior proposal that had been made by Company B, our senior management determined that the price contained in Company As proposal was too low. Shortly thereafter, Mr.Marver conveyed that message to a representative of Company A and discussions with Company A temporarily ceased.

On April20, 2010, Company B submitted a revised proposal relating to a potential purchase of our monitoring business. The revised proposal contemplated a purchase price of $54.5million in cash, plus additional earnout consideration tied to revenues from monitoring products during the 12-month period following the closing, with accounts receivable and substantially all liabilities relating to the monitoring business to be retained by Cardiac Science. On April21, 2010, the Strategic Committee met with our senior management to review and consider the latest proposal from Company B. At the meeting, the committee authorized management to enter into the latest proposed letter of intent from Company B, which included a 45-day exclusivity period, and to proceed with responding to Company Bs due diligence requests and negotiation of definitive documents relating to the transaction. Over the course of the next several weeks, representatives of Company B and its outside legal counsel engaged in a due diligence investigation of our monitoring business. Perkins Coie LLP prepared a draft of a definitive purchase agreement that was shared with Company B and its outside legal counsel, and the parties and their legal counsel subsequently exchanged drafts of that agreement during this period.

Throughout the spring of 2010, we sought to renew our existing $10million line of credit, which expired by its terms at the end of March 2010. On April27, 2010, we entered into an amended and restated credit facility with our existing lender pursuant to which the lender agreed to provide a line of credit but the amount available under the facility was reduced to $5million.

In late April 2010, we were apprised by the FDA that the FDA intended to issue updated communications regarding the AED corrective action that we announced in November 2009. At an April26, 2010 telephonic meeting of our board of directors, senior management briefed the board on the impending FDA communication and also provided an update on certain contingency planning issues that senior management had evaluated in the event that it became necessary to undertake additional costly corrective actions. On April27, 2010, the FDA issued the updated communications. Among other things, the updated communications identified certain additional problems associated with the previously announced component issue, asserted that our proposed software update addressed some but not all potential component defects and provided updated recommendations to affected customers, including a recommendation that high risk or frequent use facilities immediately replace or arrange for repair of affected units. Following the release of the FDAs communications, the price of our stock dropped 29% from a closing price of $2.20 per share on April26, 2010, to a closing price of $1.57 per share on April27, 2010. Cardiac Sciences stock continued to trade downward over the next several weeks, reaching a closing price low of $0.91 on July7, 2010.

On April28, 2010, Dr.Naumann received an email from another company, referred to in this discussion as Company D, indicating preliminary interest in our cardiac monitoring business. This initial indication of interest did not propose any price or specific terms. Because the letter of intent that we had entered into with Company B included an exclusivity provision, we did not respond to Company Ds indication of interest.

In late May 2010, Mr.Marver and other representatives of Cardiac Science met with the FDA to continue discussions regarding pending regulatory matters, including issues relating to the AED corrective action that we announced in November 2009. As a result of this meeting, it became apparent to our senior management that it was unlikely that the FDA would change its views with regard to whether the software update adequately addressed the

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component issue. Management concluded that it was likely that a full hardware recall for at least a portion of the affected AEDs would be required to satisfy the FDAs concerns. Over the next several weeks, management evaluated an expansion of the existing corrective action plan to include a hardware recall of affected AED units used in certain high risk settings, such as by first responders and in certain medical provider facilities, and engaged in discussions with the FDA about such plans.

On May25, 2010, our board of directors met. At the meeting, management updated the board of directors on pending quality issues, including corrective actions and recent discussions with the FDA. Management also presented an update on the status of negotiations with Company B. Representatives of Piper Jaffray presented their views with regard to valuation of the AED business if the monitoring business were sold and potential strategies to maximize the value of the remaining AED business should such a transaction occur. Mr.Matysik provided a financial update, including continued operating losses and erosion of our cash position, as well as the potential need for additional financing if a sale of the monitoring business was not consummated. The board of directors also discussed retention issues with regard to senior management and other key employees in light of the continued challenges that we were facing, including a proposed modification to existing incentive plans. The board of directors further discussed these issues on a telephonic meeting held on June2, 2010. Modified incentive plans were later approved by the board of directors in a telephonic meeting held on June4, 2010.

On May25, 2010, Joseph LaPorta, an executive of Criticare Systems Inc., a wholly-owned subsidiary of Opto Circuits headquartered in Wisconsin, contacted Mr.Marver to inquire whether Cardiac Science would be open to an acquisition by Opto Circuits. Mr.Marver was unable to respond immediately due to the exclusivity and confidentiality obligations under the letter of intent with Company B. Though he did not indicate the reason to Mr.LaPorta, Mr.Marver indicated it would be a few weeks before he could respond.

In early June 2010, Company B advised us that, based on its continued due diligence, it was reevaluating the transaction, that it intended to submit a revised proposal to acquire our monitoring business and that its revised proposal would likely exclude our rehabilitation product line from the transaction.

On June9, 2010, an executive of Company A contacted Mr.Davis to suggest that discussions about a purchase of our monitoring business be reinitiated. Mr.Davis, who had resigned from our board of directors on May19, 2010, referred the Company A executive to Mr.Marver.

On June14, 2010, Mr.Marver contacted a representative of Company D to inquire whether Company D would be interested in a purchase of any of our cardiac monitoring assets, and specifically our rehabilitation product line. The representative of Company D indicated an interest in evaluating such a transaction. Shortly thereafter, Company D concluded its interest was limited to the rehabilitation product line. Over the course of the next several weeks, representatives of Cardiac Science and representatives of Company D held a number of discussions regarding a potential transaction involving the rehabilitation product line and Company D engaged in a due diligence investigation relating to such a transaction. Based on these discussions and its due diligence investigation, Company D expressed an interest in purchasing the rehabilitation product line for approximately $4.1million in cash. In addition, Cardiac Science and Company D and their respective legal counsel exchanged drafts of a definitive purchase agreement and other ancillary documents relating to a potential sale of the rehabilitation product line. Our intent in pursuing this transaction was that it represented a complement to the possible transaction with Company B after Company B indicated it was uninterested in the rehabilitation product line.

On June15, 2010, Company B submitted a revised proposal to acquire our monitoring business, excluding the rehabilitation product line, at a substantially reduced price compared to the price in the existing letter of intent. Company B proposed to reduce the price to $40million in cash, plus additional earnout payments tied to revenues from monitoring products during the 12-month period following the closing, with accounts receivable and substantially all liabilities relating to the monitoring business to be retained by Cardiac Science. That same day, our board of directors met telephonically to consider Company Bs revised proposal. Our senior management briefed the board of directors on the proposed new terms and related matters, including challenges that had been encountered up to that point in negotiations with Company B and in the due diligence process. Management also advised the board of directors that the initial 45-day exclusivity period under the original letter of intent with Company B had passed. The board of directors determined that management should continue negotiations with Company B but not on an exclusive basis. The board of directors also instructed senior management to contact

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Company A to assure a competitive process. Shortly after this meeting, Mr.Marver contacted representatives of Company B and informed them that, although we were interested in continuing efforts to consummate a transaction with Company B involving a sale of the monitoring business (excluding the rehabilitation product line), we would continue discussions only on a non-exclusive basis. He also advised the representatives of Company B that we intended to undertake an effort to identify a buyer for the rehabilitation product line. Over the course of the next several weeks, Cardiac Science, Company B and their respective legal counsel continued to negotiate a definitive purchase agreement on the revised terms and to conduct due diligence activities. During this time, Company B also proposed a significant holdback of the closing purchase price to address antitrust risks they perceived in the transaction. Also during this time frame, Cardiac Science, Company B and their legal counsel exchanged drafts of other ancillary documents relating to the transaction and continued the due diligence process.

In the latter half of June 2010, we reinitiated discussions with Company A with regard to a potential sale of our monitoring business or the entire company. Over the course of the next several weeks, representatives of Cardiac Science responded to Company As due diligence requests, provided access to a data room populated with documents and other information and met with representatives of Company A to discuss a potential transaction involving the sale of the monitoring business or the entire company.

On June21, 2010, Mr.Marver emailed Mr.LaPorta to inform him that Cardiac Science was ready for a discussion about a potential transaction with Opto Circuits. The next day, Mr.Marver informed Mr.LaPorta that Cardiac Science was exploring strategic alternatives, including a potential sale of all or part of its business. Shortly thereafter, Mr.LaPorta requested an initial call with Cardiac Science management to explore a potential transaction. Prior to the initial call, in connection with preliminary discussions and to facilitate the further exchange of confidential information in contemplation of a possible transaction between Opto Circuits and Cardiac Science, Opto Circuits and Criticare entered into a non-disclosure agreement with Cardiac Science on June25, 2010.

On June 25 and 30, 2010, Mr.LaPorta and representatives of Opto Circuits conducted initial conference calls with Cardiac Science representatives to get an overview of our business and discuss the status and implications of our recent voluntary medical device recalls related to our AED products. The parties also discussed Cardiac Sciences expectations for new product releases, business and financial trends, staffing information and other matters.

On July1, 2010, Thomas Dietiker, a member of the board of directors of Opto Circuits, sent Mr.Marver an e-mail, inquiring whether the Cardiac Science board would be willing to entertain an offer by Opto Circuits to acquire the entire company at a price of $2.10 per share. Mr.Marver indicated that he would confer with other directors. That day, Mr.Marver conferred with Dr.Naumann about the proposed transaction with Opto Circuits. Afterwards, Mr.Marver indicated in a telephone conversation on July7, 2010 with Mr.Dietiker that, although the price was too low, the parties should continue their dialogue.

On July7, 2010, after continued due diligence, Company A submitted a revised draft letter of intent relating to a potential acquisition of our monitoring business. The revised letter of intent contemplated a reduced purchase price of $23million in cash but proposed contingent consideration and earnout payments of up to $19million, as well as a commitment by Cardiac Science to purchase certain components for our AED products from Company A. Mr.Marver contacted a representative of Company A via telephone and indicated that the revised offer contained too high a proportion of contingent consideration and was overly complex. He further requested that Company A simplify the offer and move more of the consideration into up-front cash.

On July8, 2010, our management team conducted another call with Mr.LaPorta and Mr.Dietiker to further discuss our business, the status of the AED recalls, the FDA warning letter received earlier in the year, and related matters. Shortly after this call, Cardiac Science provided Opto Circuits certain documents and other materials that were responsive to Opto Circuits preliminary due diligence requests.

After internal discussions, on July12, 2010 Opto Circuits submitted a proposed letter of intent to the board of directors of Cardiac Science. The draft letter of intent, which was intended to be non-binding except for certain limited provisions, included a proposal by Opto Circuits to make a cash offer for the outstanding shares of Cardiac Science for $2.10 per share, subject to certain conditions. On that same day, due to Opto Circuits concerns about the potential costs of the recent AED recalls, representatives of Opto Circuits held another call with our management

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team to further discuss the costs and risks associated with the recalls. Later that day, Mr.Marver emailed Mr.Dietiker to let him know that our board of directors would be meeting soon to discuss Opto Circuits proposal.

On July15, 2010, Company A submitted a revised proposal with regard to a potential acquisition of our monitoring business. The revised proposal contemplated an increase in the amount of cash to be paid at closing to $27million, but reduced contingent consideration, capping the potential aggregate value of the transaction at $32million. Shortly thereafter, the parties began negotiating an asset purchase agreement and ancillary documents.

On July16, 2010, our board of directors met telephonically. At the meeting, management briefed the board of directors on continuing discussions with the FDA relating to the corrective action that was first announced in November 2009. Management advised the board that, based on those discussions, they believed the FDA would agree to a modification to the corrective action plan that, in addition to the software update that was already underway, would involve the repair or replacement of affected AEDs used in certain high risk settings, such as by first responders and in certain medical provider facilities. Management advised the board of directors that their preliminary estimate of the incremental cost of the recall AEDs used in high risk settings would be in the range of $11million. Mr.Matysik also provided the board of directors a financial update, including continued erosion in our cash position. Based on managements exploration of alternatives for additional financing, Mr.Matysik advised the board of directors that additional high cost debt financing may be available. He also advised the board of directors that, based on discussions with the lender under its existing $5million line of credit, he believed the lender was willing to increase the line of credit to $15million if the FDA accepted our proposed modification to the corrective action plan. The board of directors authorized management to negotiate an amendment, that was subsequently entered into that day, to the existing line of credit to increase the amount available for borrowing to $15million. Representatives of Piper Jaffray briefed the board of directors on the status of potential transactions under consideration and related valuation considerations. They also presented their views with regard to certain strategic alternatives, including going private, selling the monitoring business and selling the entire company. Representatives of Perkins Coie LLP briefed the board of directors on certain legal considerations relating to strategic alternatives, including their fiduciary duties. Our board of directors directed management to continue negotiations with Company A, Company B, Company D and Opto Circuits but instructed management, with the assistance of Piper Jaffray, to conduct a market check to ascertain whether there were potentially other parties who might be interested in a purchase of the entire company, the AED business or the monitoring business. The board of directors determined that the full board should be involved in all important discussions of strategic alternatives and therefore voted to disband the Strategic Committee.

Prior to the July16, 2010 meeting of our board of directors, Cardiac Science or Piper Jaffray had contacted or received unsolicited inquiries from nine companies regarding a potential sale of the entire company or a portion of our business, including Company A, Company B, Company C, Company D and Opto Circuits. Preliminary discussions regarding a transaction involving the AED business had been held with Company C but had been terminated, preliminary discussions regarding a transaction involving a sale of the rehabilitation product line had been held with Company D and were ongoing, and extensive discussions with regard to a potential sale of the monitoring business had been held with Company A and Company B, both of whom had submitted proposals that Cardiac Science was continuing to pursue. Of the other four companies that had been contacted up to this time, none expressed any significant interest in a potential transaction with us. Following the July16, 2010 board meeting, at the direction of the board of directors our management team and Piper Jaffray developed a targeted list of additional parties to contact about a potential sale of the entire company or portions of our business. This list was comprised of 17 additional companies. Over the course of the next few weeks, representatives of Piper Jaffray or Cardiac Science contacted these additional companies to ascertain whether any of them were interested in exploring a potential transaction with us. Of these companies, four expressed preliminary interest in exploring a potential transaction and entered into nondisclosure agreements with us. Of these four, substantive discussions were held with one company, referred to in this discussion as Company E, about a potential sale of our monitoring business and substantive discussions were held with another company, referred to in this discussion as Company F, about a potential sale of the entire company.

On July19, 2010, we announced that we had addressed outstanding issues with the FDA relating to the AED corrective action first announced in November 2009. The announcement disclosed an updated recall plan under which Cardiac Science would repair or replace approximately 24,000 AEDs used in high risk settings at an

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estimated cost of between $11million to $15million. The announcement also disclosed that we had increased our line of credit to $15million. Following this announcement, the price of our common stock, which had closed at $1.13 per share on July16, 2010, began to trade upward.

On July22, 2010, Mr.Dietiker met with Mr.Marver and other members of Cardiac Sciences management team in person at our offices in Bothell, Washington to discuss the terms of Opto Circuits July12, 2010 non-binding proposal. After those discussions, Mr.Dietiker indicated that Opto Circuits would need to complete additional due diligence and conduct further analysis of the costs and risks of the AED recalls in order to decide whether it would consider making an offer of more than $2.10 per share.

In an email correspondence between Mr.Dietiker and Mr.Marver on July23, 2010, Mr.Dietiker indicated a willingness to consider increasing the price of its proposed offer to $2.30 per share. On that date, Opto Circuits and Cardiac Science negotiated an addendum to the non-disclosure agreement. The addendum, which Opto Circuits had requested because it was aware that we were involved in a competitive process to sell all or a part of our business, provided that in the event that we entered into an agreement to sell all or a material part of our business to a third party prior to September8, 2010, we would reimburse Opto Circuits for its reasonable out-of-pocket expenses (subject to a cap of $300,000) incurred during its continuing evaluation of a potential transaction with us. The addendum also provided that for a period of 42days after the date of the addendum, Opto Circuits would not to attempt to engage in a business combination with Cardiac Science or its affiliates or seek representation on or control of our board of directors, unless specifically invited to do so in writing by Cardiac Science or its financial advisor, Piper Jaffray.

On July24, 2010, an executive of Company A contacted Dr.Naumann and indicated that Company A was interested in exploring a potential purchase of the entire company. Following this communication, management of Cardiac Science and management of Company A held follow up discussions, as a result of which Company A advised us that it wanted to explore a purchase of the entire company but also desired to continue pursuing a proposal to purchase our monitoring business.

On July26, 2010, our board of directors met to review the status of negotiations with Opto Circuits, Company A and Company B. Management advised the board that, based on recent discussions with Opto Circuits, management believed that Opto Circuits was open to the possibility of increasing the price of its proposed offer to $2.30 per share. Management also briefed the board of directors on the proposed addendum to the non-disclosure agreement with Opto Circuits and the board of directors authorized management to enter into the addendum. Representatives of Piper Jaffray updated the board of directors on activities relating to the market check that the board of directors had authorized at its July16, 2010 meeting.

On July26, 2010, Cardiac Science and Opto Circuits entered into the addendum to their non-disclosure agreement.

On August2, 2010, Mr.Dietiker informed Mr.Marver by telephone that Opto Circuits was withdrawing its $2.10 per share offer due to the recent appreciation of our stock price.

On August3, 2010, Mr.Dietiker sent Mr.Marver an e-mail indicating that the Opto Circuits board would like to proceed with an offer to purchase our monitoring business. To that end, on August5, 2010, Opto Circuits submitted a draft letter of intent, which was intended to be non-binding except for certain limited provisions. The draft letter of intent proposed the acquisition of only our monitoring business for $30million. On the same day, Mr.Marver informed Mr.Dietiker during a telephone conversation that the price needed to be higher. On August6, 2010, Mr.LaPorta sent a revised draft of the letter of intent relating to a potential purchase of the monitoring business with an indicated price range of $33million to $35million. Over the course of the next several days, we continued to negotiate the terms of the letter of intent with Opto Circuits. On August10, 2010, Opto Circuits was provided access to an electronic data room populated with documents and other information relating to our monitoring business. On August12, 2010, we entered into the letter of intent with Opto Circuits. During the week of August16, 2010 and continuing to August25, 2010, representatives of Opto Circuits met with our management team in Bothell, Washington facility and Deerfield, Wisconsin to conduct due diligence.

On August4, 2010, the board of directors met. Mr.Marver provided an update on the status of discussions with potential buyers, as well as on the market check activities being performed by Piper Jaffray.

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During the month of August 2010, representatives of Company A and Cardiac Science continued discussions, due diligence and other activities relating to transactions involving a sale of the monitoring business and, alternatively, a sale of the entire company, including exchanging drafts of a proposed definitive purchase agreement relating to the sale of the monitoring business. In addition, during the month of August 2010, Cardiac Science and Company B continued negotiations, due diligence and other activities relating to a potential sale of the monitoring business (excluding the rehabilitation product line), including the exchange of drafts of a proposed definitive purchase agreement and various ancillary documents. During this time frame, Company B proposed a significant reduction to the purchase price to account for perceived antitrust risks in lieu of the holdback arrangement that Company B had proposed earlier in the negotiation, and we acceded to that proposal. Also during this period, Company D and Cardiac Science continued discussions and due diligence and other activities relating to a potential sale of the rehabilitation product line.

On August10, 2010, the board of directors met telephonically. Mr.Marver provided an update on the status of diligence activities among Opto Circuits, Company A and Company B. Representatives from Piper Jaffray updated the board of directors on market check activities.

On August20, 2010, Mr.Marver and Dr.Naumann met with representatives of Company F to discuss a potential sale of the entire company. Company F entered into a non-disclosure agreement at the beginning of the meeting. Company F expressed interest in exploring such a transaction but did not provide any definitive indications of value. During the ensuing three weeks, Company F and its outside legal counsel began conducting a due diligence investigation relating to a potential acquisition of the entire company.

In a telephone call on August26, 2010, Mr.Dietiker informed Mr.Marver that Opto Circuits was no longer willing to proceed with an acquisition of the monitoring business due to concerns about the challenges involved in separating and subsequently operating this business independent from our AED business. Mr.Dietiker indicated that Opto Circuits was interested in re-initiating dialogue around a purchase of the entire company. On August27, 2010, Mr.Dietiker indicated in an email to Mr.Marver that Opto Circuits was interested in pursuing an acquisition of Cardiac Science in its entirety for a price in a range of $2.10 to $2.30 per share. That same day, Mr.Marver responded briefly that he would discuss Opto Circuits proposal with our board of directors.

In late August 2010, Cardiac Science and Company E concluded negotiations of a non-disclosure agreement and, after entering into the non-disclosure agreement, Company E was provided access to an electronic data room populated with documents and other information related to our monitoring business in connection with its due diligence investigation relating to a potential acquisition of our monitoring business.

Also in late August 2010, Company D provided us a draft purchase agreement relating to the potential sale of our rehabilitation product line. Throughout September 2010, Cardiac Science and Company D ex